Fate of ADB-funded AMI project hangs in the balance

Islamabad: The fate of $455.5 million Asian Development Project (ADB)-funded Automatic Metering Infrastructure (AMI) project hangs in the balance, as Power Division is hesitant to adopt it its re-scoping till now, sources close to Minister for Planning, Development and Special Initiatives told Business Recorder.

Sharing the details, they said the project was approved by the Executive Committee of the National Economic Council (ECNEC) on July 20, 2017 with the scope of AMI meters deployment for 2.6 million consumers in one circle each, of IESCO and LESCO, at a cost of $ 455.5 million.

International consultants AF-Mercados EMI were hired to conduct a detailed technical, financial and economic feasibility study for implementation of the project. The financial viability of the project was also established at the feasibility/PC-I stage and proper diligence was carried out during approval of the project from the competent forum.

The sources said, the project since its inception has been facing difficulties in implementation that also included the problems in terms of procurement. The project is included in the list of problematic foreign-funded projects and has been discussed in the National Coordination Committee on Foreign Funded Projects (NCC-FFP).

The ADB fielded a special loan review mission on this project to further review the reasons for the delay in the implementation of the project. The mission held a meeting with the Minister for Power and SAPM on Power on May 27, 2021. During the meeting the government side explored the possibility of changing the scope of the project from one circle each in two DISCOs to all DISCOs and not installing meters for each consumer but only on Pole mounted Transformers. (PMTs).

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The ADB Mission indicated that at this stage such a change would not be acceptable to their Board and given the little time available, the financing for the project would have to be dropped.

According to the ces, the government is continuously paying 'commitment charges' on the un-disbursed amount, which till now have added up to $2.2 million.

The procurement process for AMI project in IESCO and LESCO is based on International Competitive Bidding (ICB) conducted in accordance with ADB's Procurement Guidelines.

The award of contract to the successful bidder in both IESCO and LESCO is; however, halted due to afterthoughts in the Power Division whereby questions have been raised on the feasibility of the project, and ECNEC-approved scope of installing AMI meters at consumer level. It has been suggested that the project would be more feasible if the AMI meters are installed only up to the Pole Mounted Transfer (PMT) level and for industrial and commercial consumers and not to individual residential consumer level as originally planned.

Special Assistant to the Prime Minister on Power and Petroleum, Tabish Gohar has submitted the following points: (i) as restructured AMI system with lower cost may be considered to be set up only at the sub-stations in the LESCO and IESCO circles. Both these DISCOs have very high revenue collections and may not be immediate candidates for automated meters; (ii) for the high loss-making DISCOs, automated meters with prepaid device option should be considered for installation. A complete AMI system may be more suitable for these DISCOs; (iii) meter replacement costs and other required system costs should be recovered from the consumers over a four-year period in line with the proposed project implementation schedule. A 48-month instalment payment plan is affordable for the consumers that would provide required transparency in the billing system and improve the revenue collections of the DISCOs; (iv) the project in all DISCOs may be implemented under the PPP mode to achieve the advantages of the program. The cost of the PPP mode can be fully recovered from lower costs achieved through operating efficiencies and the improvements in the revenue recoveries of the DISCOs; and (v) ADB loan program needs to be changed in scope to accommodate the proposed changes.

On the other hand, Prime Minister's Task Force on Energy considered these views and recommended that the current project may continue in its present form.

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Management of IESCO has shown its reservations on the suitability of the project in the light of its expected benefits and costs while LESCO maintained that the metering tree should be complete not only from feeder level to each distribution transformer level but also further down to end consumers as per the scope approved from ECNEC.

In ADB sponsored AMI project in Uzbekistan which covered household consumers, receipts increased to 100 percent, number of residential consumers/subscribers increased by 9.6%, receivables decreased by 91% and the subscribers with arrears decreased by 66%.

In highly efficient grid systems like that of Texas USA, Centre point Energy AMI Project in Texas, saved $ 61.54 million of cost and enhanced revenue by $ 4.79 million over 3 years.

Case study (Uzbekistan) and presentation of IESCO vividly show cased the benefits of implementation of the AMI project in its existing ECNEC approved scope.

The sources said a summary was circulated to EAD & Ministry of Planning, Development and Special Initiatives for review. EAD supported the proposal with clear course of action on the future of the project.

Ministry of PD&SI observed that as the summary is without proposal/ recommendation; therefore it is unable to offer comments.

Power Division argued that re-scoping the project to restrict it to AMI installation at PMT-level and industrial and commercial consumers has following possible implications: the current procurement process would have to be scrapped as the bidding documents were based on the present scope. This would imply that the project cannot be completed within the timeframe of the ADB loan and at the same time ADB has indicated that the loan period cannot be further extended.

The Power Division further stated that the ECNEC approved project and ADB financing for the project would have to be abandoned, unless ADB agrees to re-scope the project. New commitment charges of $ 2.2 million would be completely wasted, unless ADB agrees to re-scope the project. A new technical, financial and economic feasibility would be required for the new scope of the new project; the outcome of the feasibility study particularly in view of the planned privatization is not certain.

Copyright Business Recorder, 2021